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# A Man Has a Choice to Invest in Hundred-rupee Shares of Two Firms at Rs 120 Or at Rs 132. the First Firm Pays a Dividend of 5% per Annum and the Second Firm Pays a Dividend of 6% per Annum. Find: - Mathematics

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#### Question

A man has a choice to invest in hundred-rupee shares of two firms at Rs 120 or at Rs 132. The first firm pays a dividend of 5% per annum and the second firm pays a dividend of 6% per annum. Find:

(i) which company is giving a better return.

(ii) if a man invests Rs 26,400 with each firm, how much will be the difference between the annual returns from the two firms.

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#### Notes

1) 1 st firm

Market value of 1 share = Rs 120

Nominal value of 1 share = Rs 100

Dividend = 5%

Income on Rs 120 = 5% of Rs 100 = Rs 5

Income on Rs 1 = 5/120 = "Rs"  0.041

2 nd firm

Market value of 1 share = Rs 132

Nominal value of 1 share = Rs 100

Dividend = 6%

Income on Rs 132 = 6% of Rs 100 = Rs 6

Income on Rs 1 = 6/132 = Rs 0.045

Then investment in second company is giving better return.

2) Income on investment of Rs 26,400 in each firm

= 5/120 xx 26400 = "Rs"  1100

Income on investment of Rs 26,400 in second firm

= 6/132 xx 26400 = "Rs"  1200

∴ Difference between both return = Rs 1200 - Rs 1100 = Rs 100

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